Intraday Market Thoughts

Far Too Soon for the All Clear

by Adam Button
Oct 19, 2014 23:26

Reading weekend commentary, you get a strong sense that many market watchers have called the bottom and expect a quick return to a low volatility environment.  

We doubt it. Periods of extreme swings in sentiment rarely end abruptly. For the moment, Bullard has calmed worries by adding a 'Yellen put' to markets but how much of a delay in the taper is now priced in? Unless some leaks slip from the FOMC that say otherwise, we suspect markets will put about an 80% probability on a taper delay by the time decision day rolls around.

The thing is, if the Fed disappoints, markets could go straight back to kicking and screaming -- perhaps worse.

At the same time, Europe is its own animal now and the economic worries there are real. It means every data point is elevated and AQR rumors will soon be rampant. Eurozone budgets are also in the spotlight with reports that Germany and France are in secret discussions to approve the French budget.

In the immediate term, the yen is slightly weaker in early trading in a sign that Friday's upbeat spirit will continue.

Events to watch include speeches from the RBA's Kent at 2300 GMT and the BOJ's Kuroda at 0030 GMT.

In our most recent Premium trades, there are 2 GBPUSD with 2 charts after Monday's GBPUSD trades hit their final targets .   Full trades & charts are in the Premium Insights.
 
 

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